Net income rose to $19.9 million, or 41 cents a share, up from $13.5 million or 29 cents, earned in the year-earlier third quarter.

The Chicago-based company
MORN, +1.26%
also posted consolidated revenue of $111.9 million in the latest quarter, a 37% increase from a year ago.

Morningstar's quarterly results included revenue from previous acquisitions, including the mutual-fund data business purchased from Standard & Poor's Corp. in March.

"It was just a solid quarter all the way around," said Marvin Loh, analyst at W.R. Hambrecht & Co. "Every quarter, something seems to pop up that can cause at least a bit of concern. But this quarter went smoothly and was fundamentally their best quarter since going public in mid-2005."

Caught up in the broader market's selloff, shares of Morningstar lost 3% to stand at $72 in afternoon action. The stock touched a 52-week high of $75.75 earlier in the session.

Room for growth

Morningstar's operating margin was at 28.1% in the latest three months, wider than 25.9% in the second quarter of 2007.

"That's not high for the industry," Loh said. "A lot of their competitors who are much bigger have higher margins. So they've still got some room to grow on that front."

Operating margins among those rivals before depreciation typically run in the mid-30% to low-40% range, Loh added. He says top in the market is Moody's, which is generating operating margins in the low-50% area.

"Morningstar has some similarities to Moody's and other financial-information companies," Loh said. "But there's no one specific comparison you can make. Morningstar has elements of a number of different business models in its makeup."

The completion of the deal to buy S&P's mutual-fund database added about $9 million in revenue for Morningstar in the latest quarter, according to Loh.

"A lot of that new revenue stream came from international markets, specifically Europe," he noted.

Such international business accounted for some 22% of total revenue in the quarter. That was up from 15% a year ago, Loh said.

Another key area for growth included subscriptions to Morningstar.com and Internet advertising on its Web site. Morningstar refers to those businesses as part of its "individual segment," which generated $22.6 million in sales during the third quarter. Loh estimates that this represented a 16% improvement from a year earlier.

Another business group is Morningstar's advisers segment, which sells such products as software programs and database access. In the most recent quarter, the company said $29.4 million were generated from that segment. Compared to a year ago, that would represent a 20% increase.

Morningstar's business with institutional customers grew to nearly $61 million, up 58% from a year earlier. "Their investment-consulting business seems to be driving that segment's growth," Loh said.

Meanwhile, assets under advisement for investment consulting rose to $91.4 billion, up from $47.6 billion a year ago.

"Our operations outside the United States grew substantially. We're now much more diversified geographically, with more than 20% of our revenue base coming from outside the United States," said Joe Mansueto, Morningstar's chief executive, in a statement.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.